Corrected: Irish central bank fines Allied Irish 2 million

(Corrects headline to 2 million euros, not 2.1 million, and amends to show NCB Stockbrokers are not part of AIB)

Ireland's central bank fined Allied Irish Banks (AIB) 2 million euros ($2.6 million) for overcharging customers and said such penalties would play a bigger role in future crackdowns on lenders.

The financial crisis exposed the failings of the country's light-touch regulation and the central bank, which has since beefed up its bank supervision, also said on Tuesday it would create a dedicated enforcement directorate for 2011 and 2012.

The central bank's head of financial regulation said the enforcement action against AIB for overcharging along with publication of a new enforcement strategy showed the central bank would follow through on its pledge for tough action.

The board of directors and senior management of financial services companies operating in Ireland need to satisfy themselves that they are operating in accordance with regulatory standards in order to avoid the reputational and financial costs of possible enforcement action, Matthew Elderfield said.

Under the new strategy, the central bank will focus on managers in financial firms and deploy its enforcement powers more regularly.

The central bank said AIB had charged customers for payment protection insurance on their credit cards even though they had opted not to buy the cover. There was (an) unacceptable delay in notifying customers of overcharging and in restituting those customers, it said.

AIB will have to pay a fine of 2 million euros for the overcharging. The central bank said most affected customers had been refunded with appropriate interest and AIB had pledged to repay all those still out of pocket.

The central bank said it remained concerned that banks' internal controls did not prevent customers being overcharged and there were delays in repaying them.

It said it was looking at requiring lenders to resolve such errors within six months from the date of discovery and carrying out regular reviews to prevent such errors arising.

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